Organic Sales

Definition

Organic sales refer to sales that exclude increases from mergers, acquisitions, or other external factors. It is typically used to measure a company's or industry's internal growth capability, excluding external influences.

Origin

The concept of organic sales originated from the need in financial analysis to assess true growth. As companies expanded through mergers and acquisitions, investors and analysts required a method to evaluate a company's intrinsic growth ability, leading to the development of the organic sales concept.

Categories and Features

Organic sales are primarily categorized into two types: growth through existing products and services, and natural growth through market expansion and customer base increase. Its features include excluding the impact of external mergers and acquisitions, focusing on the company's own growth capabilities.

Case Studies

Case Study 1: Coca-Cola reported a 5% increase in organic sales in a particular quarter, mainly due to increased sales of its core products and market share gains, rather than growth through acquiring other brands. Case Study 2: Apple highlighted in its annual report that its organic sales growth was primarily driven by strong performance in iPhone and services, rather than through acquiring other tech companies.

Common Issues

Investors often confuse organic sales with total sales. Organic sales exclude growth from acquisitions, so they may be lower than total sales. Additionally, companies may report organic sales differently due to varying calculation methods, leading to inconsistencies.